DES MOINES — A lingering battle to open ISU Foundation records to public scrutiny is one step closer to resolution after both sides gave oral arguments before the Iowa Supreme Court on Thursday.

Advocates for increased oversight of Foundation records made their arguments before the court — attempting to overturn a previous Story County District Court ruling that dismissed the case.

In their appeal before the justices, Mark Gannon, former land manager for the ISU College of Agriculture and owner of Gannon Real Estate Services Inc., and Des Moines businessman Arlen Nichols, argued that the district court erred in its ruling because the Foundation “organically” changed its structure to avoid releasing public records.

The Foundation changed its structure through the negotiation of a new service agreement with the university and is no longer staffed by university employees or located on campus.

Speaking on the behalf of Gannon and Nichols, attorney Thomas Hanson said the Foundation violated part of the Iowa Code which prevents government bodies from contracting with non-government entities to avoid open-records law.

The Foundation, through attorney Mark McCormick, countered, arguing the changes did not affect the way the organization essentially functions.

Despite that fact, Hanson argued, there are still factors requiring the Foundation to disclose all of its records.

“Even if it is not a governmental body, all records relating to the funds it has received, holds, manages, invests and redistributes to Iowa State are funds that are in the ownership and control of the state Board of Regents, the state of Iowa, and therefore under the regents’ statute are public records,” Hanson said.

Iowa Code allows the Board of Regents to accept and administer trusts and also authorize nonprofit foundations such as the ISU Foundation to collect and manage trusts for the board and its institutions. Such foundations may also act as the trustee, allowing them to disperse donations.

The code also provides for a written investment policy requiring “regular and frequent oversight … by the board, including audit.”

“They are and can only be a trustee. They can’t solicit this money for themselves, as it would violate the fundamental tenets of what a charity is. They cannot do that,” Hanson said of regent institution foundations.

“They are only a receptacle, a trustee or fiduciary for funds given to Iowa State University. That’s all they can be under the regents’ statute, that’s all they are under their own articles.”

McCormick disagreed.

“The fact of the matter is that the Foundation is not a governmental entity … it is not turned into a governmental entity by the fact that there is a provision that allows a foundation of this nature to act as a trustee,” he said. “The authority to act as a trustee … is nothing other than a legal authorization to the private, nonprofit entity to act as a trustee when the authority is not owned by its business.”

McCormick went on to state that although the money the Foundation receives is for Iowa State, it is not actually the university’s money until it is transferred to the university.

“There is no accuracy to the representation that the money that goes to the Foundation is money that belongs to the university until provisions of the donor are met and there is a transfer by the Foundation of those funds to the university,” he said.

Nichols shook his head at this comment.

“If I gift to Iowa State, it is the regents’ — it’s under their flag. … The gift was to the university, and it’s a regent institution,” he said.

“Therefore, [the Foundation is] a fiduciary or third arm of the regents, making it a governmental entity open to public records scrutiny.”

Under Iowa law, the term “government body” includes nonprofit corporations, and defines records as those “in the custody of the public body responsible for the public funds or fiduciary or other third parties.”

The Foundation produced several documents upon a request filed by Gannon — IRS Form 990s for fiscal years 1995 to 2001, audited financial statements for fiscal years 1995 to 2001, lists of corporations and individual contributions, and documents pertaining to the Marie Powers estate.

However, Gannon and Nichols said this is only a sample of Foundation records that should be made public, and gives only a glimpse of the Foundation’s operations — not the overall picture.

Nichols supported his argument by citing a controversy in which claims were made that the Foundation had mishandled the Kiley and Marie Powers estate by selling it against the wishes of Marie Powers in 1996.

The Supreme Court is expected to render an opinion on the case by November.